Virtual Organisations

A virtual organisation is one that exists in a space that is not bound by legal and physical structures that often make up a conventional organisation. Many definitions of a virtual organisation exists, but Warner and Witzel identified their common features.

1. Lack of physical structure
   1. Virtual organisation tend to have less physical offices or warehouses. Often geographically dispersed.
2. Reliant on communication technology
   1. Function with the help of modern ICT. Often the heart of the organisation.
3. Mobile work
   1. Where a person works is less important than the communication options available to that person. One member of the team can be in Europa and another in the USA.
4. Hybrid forms
   1. Collaboration is key for a virtual organisation. This collaboration can be for a short period - an implementation project - or for a long time - a virtual supply chain.
5. Boundary-less and inclusive
   1. The organisation is not confined to legal entities. Co-creation is a form that can be found in virtual organisations.
6. Flexible and responsive
   1. Able to rapidly assemble from different disciplines to achieve a certain goal after which it can be dismantled.

Benefits of virtual organisation

Child recognises four potential benefits:

1. efficient coordination across boundaries of time and space
   1. Via the use of ICT. E.g. e-mail, videoconferencing.
2. more flexible combination of activities and enhanced focus on the customer
   1. Effective coordination of a process that is easier chopped up in pieces due to the virtual structure.
3. reduction of costs by reducing overhead and transaction costs
   1. Reduction of money spent on physical assets. Also by eliminating the need of man-in-the-middles that used to coordinate actions that are now being handled in the virtual organisation. E.g. order administrators that used to type in orders from system A to system B.
4. simplification of management
   1. As more information is directly shared between people, less need for coordination by managers. Reducing their efforts and need of time which eventually results into needing less managers.

Limitations of virtual organisation

1. Maintaining communication and control
   1. Less face-to-face communication and coping with different cultures, might lead to a reduction trust among the people involved.
2. Stimulation of learning and innovation
3. Vulnerability of dependence on partners
4. Security risks

When to use virtual organisation

1. Relation with customers
   1. How standardised is the product or service?
   2. How well is the product supported by an established brand?
   3. Are variations in style or personal taste involved?
   4. Is the product a personal service?
2. Relation with suppliers
   1. How tangible are the items supplied?
   2. Do suppliers need to be physically close to their customers?
3. Technological factors
   1. To what extent is creativity and innovation required?
   2. To what extent can employees work separately from their colleagues?
4. Organisational factors
   1. What form of integration is required between different people and units within the organisation?
   2. Can employees be motivated working apart from each other and their managers?
   3. Risk of serious loss of control if managers work apart from their manager?

References

Child, J. (2015). Organization: contemporary principles and practice. John Wiley & Sons.